Momentum and income draw fresh attention to Plains All American Pipeline
Plains All American Pipeline (PAA) is attracting fresh interest as traders respond to strong technical momentum in the stock and a relatively high dividend yield that appeals to income focused investors.
At a latest share price of US$25.72, Plains All American Pipeline has given investors a 41.24% year to date share price return, a 30 day share price return of 6.28% and a 12.22% 90 day share price return, indicating building momentum supported by a 59.83% 1 year total shareholder return and very strong multi year total shareholder returns.
Compare Plains All American Pipeline's recent momentum and income profile with a curated list of income focused opportunities through 11 dividend fortresses to see which stocks share similar traits.
After a strong run and with shares trading just above the average analyst target, Plains All American Pipeline still screens at a large intrinsic discount. Is the market being cautious for good reasons, or has price lagged the fundamentals?
Most Popular Narrative: 4% Overvalued
The most followed narrative puts Plains All American Pipeline's fair value at $24.76, a little below the latest close at $25.72, which frames the current debate around upside from here.
The analysts have a consensus price target of $24.76 for Plains All American Pipeline based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $20.0.
Read the complete narrative. Read the complete narrative.
The fair value call for Plains All American Pipeline rests on a tight set of revenue, margin and earnings assumptions. Analysts are effectively betting on steady volume, modest profitability gains and a future earnings multiple that sits above the wider energy sector. This raises the question of which specific growth and margin paths justify that stance and how sensitive the outcome is to small changes in those inputs.
Result: Fair Value of $24.76 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Plains All American Pipeline still faces concentration in crude focused assets and higher capital needs, which could pressure margins and challenge the current fair value narrative.
Find out about the key risks to this Plains All American Pipeline narrative.
Another view on Plains All American Pipeline valuation
The analyst fair value narrative suggests Plains All American Pipeline is about 4% overvalued at US$24.76. Yet our DCF model tells a very different story. On this view PAA at US$25.72 trades at a very large discount to an estimated future cash flow value of US$77.97. Which lens do you trust more for a long term call?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Plains All American Pipeline for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 54 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Mixed signals on Plains All American Pipeline so far. If the blend of potential risks and rewards interests you, consider acting promptly and review the full picture through 2 key rewards and 2 important warning signs
Looking for more investment ideas beyond Plains All American Pipeline?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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